Requiring individual employees as a condition of employment to sign arbitration agreements waiving their right to bring joint, class or collective actions, both in arbitration and in the courts, violates federal labor law, the National Labor Relations Board has held. The National Labor Relations Act, the Board said, confers on employees the right to pursue discrimination, wage and hour and other workplace-related claims in a joint, class or collective fashion as “protected concerted activity.” In D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012), the Board held that “employers may not compel employees to waive their NLRA right collectively to pursue litigation of employment claims in all forums, arbitral and judicial.” As the agreement in the case before it did just that, the agency found the agreement violated the statute, and ordered it rescinded or revised. The Board also concluded that the agreement violated the NLRA for the added reason that its language, which barred employees from starting “lawsuits or other civil proceedings” relating to their employment, would lead employees reasonably to believe that they were prohibited from filing unfair labor practice charges with the Board.
By no means, the Board asserted, does the decision ban all arbitration agreements with new and existing employees. “Employers remain free to insist that arbitral proceedings be conducted on an individual basis,” the NLRB affirmed. “So long as the employer leaves open a judicial forum for class and collective claims,” it continued, “employees’ NLRA rights are preserved without requiring the availability of classwide arbitration.”
The Board also recognized that a union representing employees in collective bargaining could waive individual unit employees’ rights to pursue statutory claims in court, as the Supreme Court held in 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), maintaining that collective bargaining itself is a form of statutorily protected activity. But these waivers, it said, were different from the unilaterally imposed employment policies before it in D.R. Horton.
The panel deciding D.R. Horton included Member Craig Becker on his last day on the Board, but not Member Brian Hayes, who was recused.
A court challenge to the Board’s decision is anticipated. The case may even reach the Supreme Court. For more details on the decision, please see our article, Mandatory “No-Class Action” Arbitration Waivers Interfere with Employee Rights, NLRB Rules.